Define opportunity cost and provide an example?

1.	Define opportunity cost and provide an example?
Answer» 1. Opportunity cost refers to the cost of next best alternative use. In other words, it is the value of the next best alternative foregone. 2. For example, a farmer can cultivate both paddy and sugarcane in a farm land. 3. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up. 4. Opportunity Cost is also called as “Alternative Cost” or Transfer cost.

Answer»

1. Opportunity cost refers to the cost of next best alternative use. In other words, it is the value of the next best alternative foregone.

2. For example, a farmer can cultivate both paddy and sugarcane in a farm land.

3. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up.

4. Opportunity Cost is also called as “Alternative Cost” or Transfer cost.

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Define opportunity cost and provide an example?

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